The less is always included in the greater
——————————————————————THE LESS is ALWAYS INCLUDED IN the GREATER
——————————————————————
The inclusion of one thing is the exclusion of another
——————————————————————THE INCLUSION of ONE THING IS the EXCLUSION of ANOTHER
——————————————————————http://legal-dictionary.thefreedictionary.com/_/dict.aspx?rd=1&word=include
——————————————————————
This MEANS that the term

The less is always included in the greater
——————————————————————THE LESS is ALWAYS INCLUDED IN the GREATER
——————————————————————
The inclusion of one thing is the exclusion of another
——————————————————————THE INCLUSION of ONE THING IS the EXCLUSION of ANOTHER
——————————————————————http://legal-dictionary.thefreedictionary.com/_/dict.aspx?rd=1&word=include
——————————————————————
This MEANS that the term

The less is always included in the greater
——————————————————————THE LESS is ALWAYS INCLUDED IN the GREATER
——————————————————————
The inclusion of one thing is the exclusion of another
——————————————————————THE INCLUSION of ONE THING IS the EXCLUSION of ANOTHER
——————————————————————http://legal-dictionary.thefreedictionary.com/_/dict.aspx?rd=1&word=include
——————————————————————
This MEANS that the term

The less is always included in the greater
——————————————————————THE LESS is ALWAYS INCLUDED IN the GREATER
——————————————————————
The inclusion of one thing is the exclusion of another
——————————————————————THE INCLUSION of ONE THING IS the EXCLUSION of ANOTHER
——————————————————————http://legal-dictionary.thefreedictionary.com/_/dict.aspx?rd=1&word=include
——————————————————————
This MEANS that the term

The Court could have disposed of the entire matter summarily by reference to

Crain v. Commissioner

or any number of other cases that stand for the proposition that we need not address frivolous arguments

[footnotes omitted]

Well, why does the decision go on for another 40 pages?

The Court has taken the time, however, to address those arguments because Mr. Waltner appears to be perpetuating frivolous positions that have been promoted and encouraged by

Peter Hendrickson’s

book

Cracking the Code:

The Fascinating Truth About Taxation in America

(2007)

Indeed, it appears not merely that Mr. Waltner’s positions are predicated on that book but that his returns and return information have been used to promote the frivolous arguments contained in that book

Consequently, a written opinion is warranted

It’s not that the IRS didn’t err; they did

It’s what the IRS counsel did after making mistakes that contrasts with what the petitioner

(Mr. Waltner)

did

I’ll let Judge Buch take it:

Respondent’s counsel sought discovery that went beyond the scope of this case, and the Court issued orders excusing Mr. Waltner from responding to those requests

Likewise, respondent’s counsel was evasive in answering some of Mr. Waltner’s discovery requests, and the Court ordered respondent to supplement those responses

In each instance, once the Court ruled, respondent’s counsel cured the defect, through either supplementing his responses or accepting the Court’s determinations that his requests were improper

Mr. Waltner sought to avoid answering every discovery request

There’s more, though, a lot more

It appears that the petitioner’s aided a Web site used to market

Cracking the Code

The Court then takes 30 pages to demolish the arguments in the book

Here are some additional excerpts of Judge Buch’s opinion:

Cracking the Code

is written by

Peter Eric Hendrickson

Nowhere in his book does Mr. Hendrickson set forth his credentials, other than on the back cover where he vaguely identifies himself as

“researcher, analyst and scholar”

Add to that felon and serial tax evader

Well, you have a lot of free time to research when you’re at ClubFed

It is this passage that is quoted at the beginning of

Cracking the Code

It is fitting because the book is largely an exercise in twisting the meaning of words into what the author wants them to mean, even if statutes, regulations, and case law define those words otherwise…

Having spent the immediately preceding chapter misinterpreting the word

“including”,

the author turns to the same Latin phrase discussed above and then proceeds to misinterpret it…

This chapter provides an example of how one illogical conclusion can be used to bolster another…

Turning to the subject of withholding, the author sets forth one of his fundamental, and fundamentally incorrect, positions regarding tax reporting

Having erroneously concluded that the term

“employee”

includes

only government employees

(and a few selected others),

the author concludes that

“this kind of withholding only applies to the pay of federal government workers”…

The positions advocated in

Cracking the Code

have routinely been rejected, with its author being criminally convicted and its adherents being sanctioned

I could go on, but I think you get the point; I’m certain Mr. Waltner gets the point

While he only received a $2,500 sanction, he has other Tax Court cases in the pipeline

After my recent posts about tax protesters who lose in court, I received several emails advising that there is a new and improved version of tax protesting set forth in the book,

Cracking the Code

So I checked to see how the book had faired in court cases

There are two reported cases

In both cases, the court issued an injunction against tax preparers who apparently used the book’s theories to prepare tax returns

Here’s some excerpts:

United States of America v. Beverly J. Hill and Darrell J. Hill,

No. CV-05-877-PHX-DGC,

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA,

2005 U.S. Dist. LEXIS 38086;

97 A.F.T.R.2d (RIA) 548

December 22, 2005, Decided

The Court further concludes that an injunction prohibiting only violations [*15] of

IRC §§ 6694

and

6695

would not be sufficient to prevent Defendants’ interference with the proper administration of the IRC

Defendants continue to hold the erroneous belief that wages are not taxable income under the IRC and that Plaintiff is thus

“imposing against them unconstitutional taxation”

Doc # 170 Cal. 631, 151 P 1;

see Docs. ## 112 at 2, 152-53

(Defs.’ Affs.)

In fact, in April 2005 — after Plaintiff filed this lawsuit — Defendant Darrell Hill filed forms with the IRS in an attempt to reduce to zero dollars the amount of wages previously reported to the IRS by five of his former employers

Doc. # 18 Ex. I

(IRS Form 4852,

Substitute for W-2,

Wage and Tax Statement)

2 Such frivolous filings have impeded the ability of the IRS to administer tax laws and has placed significant administrative and financial burdens on the IRS

Doc. # 121 PP 15-16

2 It appears that Defendant discovered this new practice from the book by Peter Hendrickson,

“Cracking the Code:

The Fascinating Truth About Taxation in America”

Docs. ## 18-19 Exs. F

Defendants included the book with their answers and have avowed their belief in the book’s interpretation of the IRC

Docs. ## 12 P 4, 13 P 4, 18-19 Exs. E

UNITED STATES OF AMERICA v. DONALD A. GRAY,

File No. 1:07-CV-42,

UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF MICHIGAN,

SOUTHERN DIVISION,

2007 U.S. Dist. LEXIS 19833;

99 A.F.T.R.2d (RIA) 1695,

March 19, 2007, Decided

Mr. Gray resides in Portage, MI

The United States alleges that Mr. Gray has been fraudulently preparing federal income tax returns since 2004

At the hearing Mr. Gray admitted that he prepares two types of tax returns

Mr. Gray stated that he prepares conventional federal income tax returns and he prepares federal income tax returns based on the book

Cracking the Code:

The Fascinating Truth about Taxation in America

by Peter Eric Hendrickson

Mr. Gray referred to tax returns based on Mr. Hendrickson’s book as either

“cracking the code re-turns”

or

“zero-based returns”

The premise of a

“cracking the code return,”

as acknowledge by Mr. Gray at the hearing, is that

“income”

is not defined in the I.R.C. and wages earned by non-federal employees are not subject to the federal income tax

******

Mr. Gray has asserted that:

(i) that his customers had no income and

(ii) that his customers’ wages are not tax-able income

The position that his customers had no in-come or [*7] that his customers’ wages were not taxable are variations of the argument that the I.R.C. does not define

“income”

and that wages are not

“income”

Both of these arguments have been clearly rejected by the courts

E.g.,

Perkins v. Commissioner,

746 F.2d, 1187, 1188

(6th Cir. 1984)

(referring to such arguments about

“income”

as being

“totally without merit”)

The Court finds that Mr. Gray was asserting a position that did not have a realistic possibility of being sustained on the merits